LIMITATION ACT

Part 5
QUESTIONS
Discuss the effects of fraud or mistake on the period of
limitation. (3)
Effect of fraud or mistake on the period of limitation. (SN -2)
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What is an acknowledgment of debt? What is its effect on

limitation?
State the essentials of valid acknowledgment.
Discuss acknowledgment of debt under the Limitation Act.
“I admit the loan, but I have since repaid the amount”.
Whether it is sufficient acknowledgement? Decide
SEC 17
17. Effect of fraud or mistake.—(1) Where, in the case of any suit or
application for which a period of limitation is prescribed by this Act,—(a)
the suit or application is based upon the fraud of the defendant or
respondent or his agent; or
(b) the knowledge of the right or title on which a suit or application is
founded is concealed by the fraud of any such person as aforesaid; or
(c) the suit or application is for relief from the consequences of a mistake; or
(d) where any document necessary to establish the right of the plaintiff or
applicant has been fraudulently concealed from him, the period of limitation
shall not begin to run until plaintiff or applicant has discovered the fraud or
the mistake or could, with reasonable diligence, have discovered it; or in the
case of a concealed document, until the plaintiff or the applicant first had
the means of producing the concealed document or compelling its
production:
Contd..
Provided that nothing in this section shall enable any suit to be instituted or
application to be made to recover or enforce any charge against, or set aside any
transaction affecting, any property which—
(i) in the case of fraud, has been purchased for valuable consideration by a
person who was not a party to the fraud and did not at the time of the purchase
know, or have reason to believe, that any fraud had been committed, or
(ii) in the case of mistake, has been purchased for valuable consideration
subsequently to the transaction in which the mistake was made, by a person
who did not know, or have reason to believe, that the mistake had been made,
or
(iii) in the case of a concealed document, has been purchased for valuable
consideration by a person who was not a party to the concealment and, did not
at the time of purchase know, or have reason to believe, that the document had
been concealed.
Contd..
Sub section (2) - Where a judgment-debtor has, by
fraud or force, prevented the execution of a decree or
order within the period of limitation, the court may,
on the application of the judgment-creditor made
after the expiry of the said period extend the period for
execution of the decree or order
Provided that such application is made within one
year from the date of the discovery of the fraud or the
cessation of force, as the case may be.
Introduction
Section 17 of the Act deals with the effect of 'fraud' or
'mistake' on period of limitation prescribed by the Act.

As per this, the limitation shall be computed from the time
when the fraud became known to the person defrauded.

The main object of this section is to keep the right of a

person to sue, suspended, so long as he is not aware of the
fraud committed against him. Such a period is excluded
from the prescribed period of limitation.
The provision of section 17 embodies the fundamental principles
of justice and equity, viz., that a party should not be
penalized for failing to adopt legal proceedings when the
facts or material necessary for him to do so have been willfully
concealed from him and also
that a party who has acted fraudulently should not gain the
benefit of limitation running in his favour by virtue of such
fraud.

Scope of section 17
This section applies to suits and applications but does not apply
to appeals.
Section 17 is based on the principle that the right of a
party defrauded cannot be affected by lapse of time or
by anything else done or omitted to be done by him so
long as he remains without any fault of his own, in
ignorance of the fraud which has been committed.

But as soon as the circumstances constituting the

fraud become known to him, subsequent lapse of
time will operate as a bar.
The section applies to the following classes
of suits and applications
(a) where they are based upon the fraud of the
defendant or respondent or his agent.
(b) where the knowledge of the right or title is
concealed.
 (c) where they are for relief from consequences of
mistake.
(d) where any document necessary to establish such
right has been fraudulently concealed.
In the first three cases the period of limitation begins to
run from the time the fraud or mistake is discovered or
could have been discovered with reasonable diligence,
In the cases of fourth class i.e., concealment of
documents, the time begins to run when the plaintiff or
the applicant first had the means of producing the
concealed document or compelling its production.

However, the rights, of a bonafide purchaser for value

without notice of fraud, mistake or concealment are
protected.
Conditions to invoke Sec 17
A person desiring to invoke the aid of this section must
establish three things:—

(1) that there has been fraud;

(2) that by means of such fraud he was kept away from the
knowledge of his right to sue or apply or of the title on
which such right is founded, and
(3) time will be extended under the section only as against
the person guilty of fraud or who is accessory thereto who
claims through the person guilty of fraud, otherwise
than in good faith and for valuable consideration.
If there is no fraud on the part of the defendant, the
plaintiff can't get benefit of the section.

In Swarnamoyee Dasi vs Prabodh Chandra Sarkar,

it was observed by the court that to constitute a fraud
there should be an abuse of confidential position,
some intentional imposition, some deliberate
concealment of facts, a designed fraud by which a
party knowing to whom the right belongs conceals the
facts and circumstances giving that right.
Ingredients of fraud
In order to plead the fraud there must be existence of the
following ingredients:—
(1) a promise made without any intention of performing it;
(2) any such act or omission, as the law specifically declares to be
fraudulent;
(3) the suggestion, as a fact, of that which is not true, by one who does
not believe it to be true,
(4) any other act fitted to deceive, and
(5) the active concealment of a fact by one having knowledge or belief
of the fact. So, according to this section, the fraud must have been
committed by the defendant or respondent or his agent. The section
does not apply unless there has been fraudulent concealment by the
defendant of the plaintiff’s right to sue.
Section 17(2) of Limitation Act provides that where the
execution of a decree or order within the period of
limitation has been prevented by fraud of the judgment-
debtor, the court may, on the application of the
judgment-creditor made after the expiry of the period
of limitation, extend the period for the execution of the
decree or order.

But, such an application must be made by the judgment-

creditor within one year from the date of the discovery
of the fraud or the cessation of force, as the case may be.
Sec 18
18. Effect of acknowledgment in writing

Sub section (1) -  Where, before the expiration of the

prescribed period for a suit of application in respect of
any property or right, an acknowledgment of liability in
respect of such property or right has been made in
writing, signed by the party against whom such
property or right is claimed, or by any person through
whom he derives his title or liability, a fresh period
of limitation shall be computed from the time when
the acknowledgment was so signed.
Contd..
Sub section (2) -  Where the writing containing the acknowledgment is
undated, oral evidence may be given of the time when it was signed; but
subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral
evidence of its contents shall not be received.

Explanation.—For the purposes of this section,—

(a) an acknowledgment may be sufficient though it omits to specify the exact
nature of the property or right, or avers that the time for payment, delivery,
performance or enjoyment has not yet come or is accompanied by a refusal to
pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or
is addressed to a person other than a person entitled to the property or right;
(b) the word “signed” means signed either personally or by an agent duly
authorised in this behalf; and
(c) an application for the execution of a decree or order shall not be deemed
to be an application in respect of any property or right.
Meaning of acknowlegment
“Acknowledgment” generally refers to acceptance or
admission of something that exists.

The Act uses the term “acknowledgement” to mean

an admission of an existing liability, in lieu of
which the period of limitation is extended.
Ingredients of section 18 and essentials of a valid
acknowledgement
(1) The acknowledgement must have been made before
the expiration of the period prescribed.
The Hon’ble Supreme Court in “Sampuran Singh and Ors.
v. Niranjan Kaur and Ors.─ (1999) 2 SCC 679”, observed
that the acknowledgment, if any, has to be prior to the
expiration of the prescribed period for filing the suit, failing
which it shall not lead to a fresh trigger of limitation period.
Therefore, a fresh acknowledgement shall imply a fresh start
of limitation period, wherein as per section 12 (1) of the Act,
the date on which the acknowledgment is given shall not be
included.
(2) The acknowledgement must have been made by the party
against whom the right is then claimed or by any person
through whom he derives his title or liability. An
acknowledgement by a person not liable at the time of
acknowledgement does not amount to acknowledgement in law.

(3) The acknowledgement must be in writing; however, if the

acknowledgement is undated, oral evidence may be given of
the time when it was signed. Section 18(2) clearly prohibits
receiving of oral evidence of contents of the acknowledgement,
subject to the provisions of the Evidence Act.
(4) Such acknowledgement must have been signed by
the party,
his agent or
the party against whom the right is then claimed or
by any person through whom he derives his title or
liability.

(5) The acknowledgement is not required to be made to

the creditor or the person entitled to the right or the
property. It may be made to any person, even to one who
has no connection with the creditor.
(6) The acknowledgement must be an acknowledgement
of liability. It is not necessary that the acknowledgement must
also contain or import a promise to pay; a simple admission
that debt is due, is quite sufficient under the indian law .
An acknowledgement will be sufficient for the purposes of the
section, even though it is coupled with a refusal to pay, or with a
claim to set-off, or with a statement that time for payment has
not yet arrived.
But all the same it must be an admission of liability; a
statement by the debtor implying that there is no liability does
not amount to an acknowledgement. an acknowledgement or
liability need not be express; it may be by implication.
Illustrations of sufficient acknowledgement
of liability
(1) “I am ashamed that the account has stood so long."
(2) “Please send in the account made up to Christmas last".
(3) “The promissory note which I gave is unstamped and I
will not pay.”
(4) “I cannot afford to pay my new debts much less the old
debt I owe you."
(5) “I admit the existence of a running account....my
representatives will compare accounts and pay what may
he find to be due.....“.
(6) “I am willing to pay you the sum due by installments."
CASES – VALID ACKNOWLEDGMENT
Considering that the Act requires such acknowledgement to be in writing,
in general parlance, the following may be considered as valid
acknowledgement-

(a) Balance sheets are deemed to be the most substantive admission of

indebtedness and sufficient acknowledgment under the Indian Limitation
Act (held by the Hon’ble Calcutta High Court in Bengal Silk Mills Co. vs
Ismail Golam Hossain Arif AIR 1962 Cal 115, 65 CWN 856).
However, care must be taken that such balance sheet must be a duly
signed one, failing which it shall not be considered as an authenticated
document, and as such shall not stand as a valid acknowledgment under
section 18 of the Act (Babulal Rukmanand vs. Official Liquidator,
Bharatpur Oil Mills Pvt. Ltd. AIR 1968 Raj 214)
CONTD..
(b) E-mails acknowledging the debt constitute a valid and legal
acknowledgement of debt, despite the fact that it is not a strictly “signed”
document for the purpose of section 18 of the Act (Sudarshan Cargo Pvt.
Ltd vs. M/S Techvac Engineering Pvt Ltd. [C.O.P. No.11/2013]).
Considering that “e-mails” are legally recognized forms of communication
under the Information Technology Act, e-mails are valid acknowledgment
under the Act.

(c) Cheque given by a debtor to pay his dues is an acknowledgement, even

though the Cheque is dishonoured. (Hindusthan Apparel Industries vs.
Fair Deal Corporation AIR 2000 Guj 261 (FB)). It was held that even
though the cheque so given was later dishonoured, the very fact that the
debtor gave a cheque to the creditor is indicative of acknowledgement of
debt by the debtor.
Illustration of insufficient
acknowledgements
(1) A letter states - “Enclosing a remittance of rupees
100 to old account“, does not show that a further sum is
due.
(2) “I wish to look to your accounts; in my own
account I do not see any amount due to you. Please,
therefore, send the account."
(3) “I admit the loan, but I have since repaid the
amount."
Important points
It is not necessary that there should be a promise to
pay; the simple admission of a debt is sufficient.

An acknowledgement does not create any new right of

action, but only enlarges the time and has the effect of
making a new-period run from the date of the
acknowledgement.

An acknowledgement of a barred debt cannot give

fresh period of limitation in favour of creditors.
Under this section, an acknowledgement is not
limited in respect of a debt only, it may be in respect of
"any property or right" which is the subject-matter of
the suit, example., the taking of account of a dissolved
partnership.

An application for the execution of a decree or order

shall not be deemed to be an application in respect of
any property or right.
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